1039-00001 · Torchlight Mining Corp · documents

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ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Attorneys at Law

555 California Street, 40th Floor San Francisco, California 94104

Telephone: (415) 773-6000 Facsimile: (415) 773-6001 www.calderwoodharkness.com

Elaine Forsythe Partner Antitrust & Competition Practice Group Direct Dial: (415) 773-6142

Email: eforsythe@calderwoodharkness.com

May 22, 2024

VIA HAND DELIVERY AND EMAIL

Mr. Søren Dalmqvist Chief Executive Officer Torchlight Mining Corp. 200 Bay Street, Suite 3400 Toronto, ON M5J 2J2 Canada

Ms. Priya Anand General Counsel Torchlight Mining Corp. 200 Bay Street, Suite 3400 Toronto, ON M5J 2J2 Canada

Copy delivered to TMC U.S. Operations: 8750 West Sahara Avenue, Suite 210 Reno, NV 89117, USA

Re: Closure of DOJ Antitrust Division Grand Jury Investigation — Grand Jury No. GJ-22-0194, U.S. District Court, Northern District of California, San Francisco Division; Non-Prosecution Agreement (DOJ Reference No. ATR-SF-2024-00312)

Calderwood & Harkness Matter No.: 1039-00001

Classification: Attorney-Client Privileged and Confidential

Dear Søren and Priya:

1. Purpose and Confirmation of Investigation Closure

We are writing to confirm the receipt of the letter from the United States Department of Justice, Antitrust Division, dated May 20, 2024, formally closing the grand jury investigation captioned above as to Torchlight Mining Corp. ("TMC" or the "Company"). This correspondence constitutes our formal written confirmation to the Company's senior leadership regarding the resolution of this matter and our recommendations concerning the Company's continuing obligations under the Non-Prosecution Agreement described herein.

As you are aware, the investigation at issue was a DOJ Antitrust Division grand jury investigation into suspected price-fixing, market allocation, and bid-rigging in the North American specialty-minerals sector, specifically involving the markets for high-purity feldspar, industrial talc, and rare-earth concentrates. The investigation was conducted before Grand Jury No. GJ-22-0194, empaneled in the United States District Court for the Northern District of California, San Francisco Division. The investigation was formally opened on February 10, 2022, and over the ensuing twenty-seven months, the Antitrust Division conducted an extensive examination of pricing and allocation practices among several participants in the specialty-minerals industry, including TMC and certain of its competitors.

We are pleased to confirm that this investigation has now been resolved through the Non-Prosecution Agreement (the "NPA") executed on May 6, 2024 (DOJ Reference No. ATR-SF-2024-00312). The NPA was executed by you, Søren, on behalf of TMC, and by Julia Stafford-Hayes, Deputy Assistant Attorney General, Antitrust Division, on behalf of the United States Department of Justice. As of May 20, 2024, the DOJ considers the investigation closed as to TMC, subject to TMC's continued compliance with all terms and conditions of the NPA during the three-year compliance period.

We wish to extend our congratulations on this favorable resolution. The outcome avoids criminal charges against TMC or any current TMC employee, subject to TMC's continued compliance with the NPA's terms. This is a meaningful and significant result, reflecting the Company's sustained commitment to cooperation and remediation throughout the course of the investigation. We note, however, that the NPA contains a separate carve-out for Gavin Holt individually, which is addressed in further detail in Section 6 below.

2. Summary of Matter History

Given the length and complexity of this engagement, we believe it is useful to provide a brief chronological recap of the principal milestones for your records and for the benefit of any TMC officers or directors to whom this letter is circulated.

TMC first became aware of the investigation when it received Grand Jury Subpoena Duces Tecum No. GJ-22-0194-SD-003, served on the Company on February 14, 2022. The subpoena required the production of a wide range of documents relating to TMC's pricing, bidding, and competitive conduct in the North American specialty-minerals markets from January 1, 2016 through the date of issuance. Calderwood & Harkness LLP ("Calderwood & Harkness" or "C&H") was formally engaged by TMC on February 18, 2022, to represent the Company in connection with the investigation and to conduct a privileged internal investigation of the underlying conduct.

On May 20, 2022, TMC received a target letter from the DOJ Antitrust Division, confirming that the Company was a target of the grand jury investigation. Receipt of the target letter underscored the seriousness of the matter and prompted the Company's decision—on the advice of this firm—to pursue a strategy of proactive cooperation with the DOJ, which ultimately proved instrumental in achieving the resolution that has now been obtained.

Calderwood & Harkness conducted an extensive internal investigation over the course of approximately eleven months. The internal investigation encompassed the review of approximately 555,000 documents, comprising approximately 487,000 documents collected and reviewed in connection with the first subpoena response and an additional approximately 68,000 documents collected and reviewed in connection with a second subpoena response, totaling approximately 3.2 million pages of material. Document review was supported by Redstone Digital Forensics Inc. (for data collection, processing, and hosting) and Hargrove Forensic Advisory LLC (for forensic accounting and economic analysis of affected commerce). In addition, Calderwood & Harkness attorneys conducted in-depth interviews of twenty-three (23) current and former TMC employees, including individuals in the Company's commercial, sales, pricing, and executive leadership functions.

The findings of the internal investigation were presented to the TMC Board of Directors on January 20, 2023. Following the Board's authorization, Calderwood & Harkness submitted a detailed cooperation proffer to the DOJ Antitrust Division on February 15, 2023. The proffer outlined the findings of the internal investigation and provided the DOJ with a comprehensive understanding of the relevant conduct, the individuals involved, and the scope of affected commerce.

Subsequent to the proffer submission, two TMC employees—Sandra Chu (Director, Strategic Pricing) and Thomas Eriksen (former Vice President, North American Sales)—participated in voluntary proffer sessions with DOJ attorneys and FBI agents. Ms. Chu's proffer session took place on March 10, 2023, and Mr. Eriksen's proffer session took place on April 22, 2023. Both sessions were conducted pursuant to proffer agreements negotiated by Calderwood & Harkness, and both employees provided substantive and candid testimony regarding the conduct at issue.

On September 15, 2023, TMC submitted to the DOJ a proposal for an Enhanced Antitrust Compliance Program, developed by Calderwood & Harkness in collaboration with Meridian Compliance Partners LLC. The compliance program proposal was a critical element of the Company's cooperation strategy and demonstrated TMC's commitment to meaningful, lasting remediation.

On November 1, 2023, the DOJ communicated its willingness to negotiate a Non-Prosecution Agreement with TMC, a significant milestone reflecting the Division's recognition of the quality and timeliness of the Company's cooperation. NPA negotiations proceeded from January 2024 through April 2024, during which time the parties negotiated the monetary payment amount, the cooperation obligations, the compliance program requirements, the independent monitor provisions, and the Agreed Statement of Facts. Terms were agreed in principle on April 8, 2024.

The NPA was executed on May 6, 2024, and the DOJ formally closed the investigation as to TMC by letter dated May 20, 2024. The total duration of the matter, from engagement to closure, was approximately twenty-seven months.

3. Remaining NPA Obligations — Overview

While we are pleased to report that the investigation has been formally closed, it is critically important that TMC's leadership and Board understand that the NPA imposes continuing obligations on the Company for a defined period, and that compliance with those obligations is essential to preserving the favorable resolution that has been achieved.

The NPA has a term of three (3) years from the date of execution. Accordingly, the NPA term runs from May 6, 2024 through May 6, 2027. Throughout this period, TMC must comply with all terms and conditions of the NPA, including but not limited to the monetary payment obligation, cooperation requirements, the Enhanced Antitrust Compliance Program, the independent compliance monitor arrangement, and the annual certification requirements. Material breach of any NPA obligation would permit the DOJ to prosecute TMC based on the Agreed Statement of Facts set forth in Appendix B to the NPA, without the need for any additional grand jury proceedings. The consequences of a material breach would therefore be severe, and we cannot overstate the importance of vigilant compliance with each and every NPA term.

We strongly recommend that this letter be circulated, in its entirety, to Margaret Caldwell (Chair of the TMC Board of Directors), Richard Fong (Chief Financial Officer), and Janet Moreau-Shaw (Chair of the Audit Committee), so that each of these individuals has full awareness of the NPA's continuing obligations and the consequences of non-compliance. We further recommend that the TMC Board establish a standing agenda item for NPA compliance reporting at each regularly scheduled Board meeting throughout the three-year NPA term.

The sections that follow address each of the principal remaining NPA obligations in turn.

4. Monetary Payment Obligation

The NPA requires TMC to make a monetary payment of USD 48,500,000 (forty-eight million five hundred thousand United States dollars) to the United States Treasury. This payment is due within sixty (60) days of the NPA execution date—that is, by July 5, 2024.

The calculation basis for the monetary payment is as follows. The DOJ's standard methodology for determining the monetary component of an NPA in a horizontal price-fixing case begins with a baseline of twenty percent (20%) of the subject company's share of "affected commerce," i.e., the volume of commerce in the affected product markets during the relevant period. The DOJ determined TMC's share of affected commerce to be approximately USD 478 million. Application of the 20% baseline to this figure yields a starting point of approximately USD 95.6 million. The DOJ then applied a cooperation credit and remediation discount of approximately 49.2%, reflecting the timeliness, completeness, and quality of TMC's cooperation with the investigation and the Company's adoption of meaningful remedial measures, including the Enhanced Antitrust Compliance Program. The resulting monetary payment amount is USD 48.5 million.

We note that TMC's current litigation reserve of USD 50 million, which was increased from USD 30 million in Q3 2023 in anticipation of this outcome, is adequate to cover the required payment. We recommend the following coordination steps in connection with the payment:

(a) Coordination with CFO Richard Fong: The payment should be reflected in TMC's financial statements in accordance with applicable accounting standards. We recommend that TMC consult promptly with its external auditors, Calvert & Associates LLP (engagement partner: Daniel Moreau), regarding the appropriate accounting treatment for the NPA payment, including the timing of expense recognition and the release of any excess litigation reserve (the current reserve of USD 50 million exceeds the payment amount by USD 1.5 million).

(b) Coordination with Ironbridge Capital Markets Inc.: TMC should coordinate with its capital-markets advisor, Ironbridge Capital Markets Inc. (Alan Kirkwood), regarding any market-disclosure obligations arising from the NPA resolution and the monetary payment, including any obligations under TSX or NYSE listing rules to issue a press release or material-change report.

(c) Payment logistics: Calderwood & Harkness will provide TMC with the wire instructions for the United States Treasury as received from the DOJ Antitrust Division. We expect to receive these instructions within the next several business days and will transmit them to Priya Anand and Richard Fong promptly upon receipt. We recommend initiating the payment process well in advance of the July 5, 2024 deadline to avoid any risk of late payment, which could be viewed by the DOJ as a compliance failure.

5. Cooperation Obligations

The NPA imposes continuing cooperation obligations on TMC for the full three-year NPA term, running from May 6, 2024 through May 6, 2027. The scope of these cooperation obligations is broad, and TMC should be prepared for the possibility that the DOJ will call upon the Company to provide assistance on multiple occasions during this period. Specifically, the cooperation obligations require:

(a) Full and continuing cooperation: TMC must continue to cooperate fully and truthfully with the DOJ Antitrust Division in any related investigations or prosecutions arising out of, or connected with, the conduct at issue in the investigation.

(b) Employee availability: TMC must make current and, to the extent within its control, former employees available for interviews, proffer sessions, depositions, and testimony—including grand jury and trial testimony—as reasonably requested by the DOJ.

(c) Document and information production: TMC must provide documents and information as reasonably requested by the DOJ, in a timely manner and in the format specified by the Division.

It is important to understand the practical implications of these cooperation obligations. The DOJ's investigation of the North American specialty-minerals sector is not concluded as to all parties. We are aware that the Division is continuing its investigation of at least two other companies: Ridgecrest Minerals Inc. (separately represented by Davenport, Kline & Archer LLP) and Pinnacle Earth Resources Ltd. (separately represented by Ashford Whitmore LLP). The DOJ may also be investigating other entities or individuals that have not been publicly identified. In addition, as discussed in Section 6 below, the DOJ reserves the right to pursue criminal charges against Gavin Holt individually, and Holt is separately represented by Briarcliff Law Group PLLC (Patrick Dunleavy, San Francisco). TMC's cooperation obligations may extend to all of these proceedings, and current TMC employees may be called upon to provide testimony in any prosecution or proceeding arising from the underlying conduct.

We recommend that TMC designate Priya Anand as the internal point of contact for any DOJ cooperation requests. All requests from the DOJ should be channeled through Calderwood & Harkness. No TMC employee should respond directly to a DOJ inquiry or request for information without first consulting with this firm. We will coordinate all responses to ensure that they are timely, complete, and consistent with TMC's obligations under the NPA.

In addition, we wish to remind all TMC personnel that they should not discuss the investigation, the NPA, or the terms of either with employees, counsel, or representatives of Ridgecrest Minerals Inc., Pinnacle Earth Resources Ltd., Cascade Chemical Supply Co., or any other company or individual that was or may be a subject or target of the DOJ's investigation in this sector. Any such communications, even if seemingly innocuous, could jeopardize TMC's compliance with the NPA and could also raise separate obstruction concerns. If any TMC employee receives an inquiry from any such party, that inquiry should be referred immediately to Priya Anand, who should in turn notify Calderwood & Harkness without delay.

6. Gavin Holt Carve-Out

We wish to draw particular attention to the treatment of Gavin Holt under the NPA. The NPA expressly does not extend its protections to Gavin Holt individually. The DOJ reserves the right to pursue criminal charges against Holt based on the conduct described in the NPA and in the Agreed Statement of Facts set forth in Appendix B.

As you are aware, Holt served as TMC's Senior Vice President of Commercial Operations and was a central figure in the conduct that gave rise to the investigation. Holt resigned from TMC effective September 30, 2021—approximately five months prior to the service of the grand jury subpoena. Following the commencement of the investigation, Holt retained separate counsel: Patrick Dunleavy of Briarcliff Law Group PLLC, San Francisco. Holt appeared before the grand jury on June 14, 2022, at which time he asserted his Fifth Amendment privilege against self-incrimination and declined to provide testimony.

TMC's cooperation obligations under the NPA may include making current employees available to testify against Holt in any future criminal proceedings. The Company should be prepared for this possibility and should ensure that all individuals who may be called upon to testify are aware that they may be contacted by the DOJ for this purpose.

We recommend the following internal protocol regarding Gavin Holt:

(a) Any contact from Holt, his counsel Patrick Dunleavy, or any representative of Briarcliff Law Group PLLC should be referred immediately to Calderwood & Harkness. No TMC employee should communicate with Holt or his representatives regarding any matter related to the investigation, the NPA, or the underlying conduct without Calderwood & Harkness counsel present.

(b) TMC should ensure that its document-retention protocols continue to preserve all documents relevant to the investigation, including any documents relating to Holt's conduct, for the duration of the NPA term and beyond, as they may be needed in connection with any future prosecution of Holt.

(c) If any TMC employee is contacted directly by the DOJ, the FBI, or any other government agency regarding Holt, the employee should politely indicate that all communications should be directed to TMC's outside counsel and should promptly notify Priya Anand and Calderwood & Harkness.

7. Enhanced Antitrust Compliance Program

A cornerstone of the NPA is TMC's obligation to implement and maintain the Enhanced Antitrust Compliance Program described in Appendix A to the NPA (the "Compliance Program"). The Compliance Program was developed by Calderwood & Harkness in collaboration with Meridian Compliance Partners LLC, an independent compliance consulting firm led by Claudia Ferraro. The DOJ's approval of the Compliance Program was a critical factor in the Division's decision to resolve the investigation through an NPA rather than through criminal charges.

TMC must implement and maintain the Compliance Program throughout the three-year NPA term. The key elements of the Compliance Program are as follows:

(a) Mandatory Annual Antitrust Compliance Training: All TMC employees in commercial, sales, pricing, business development, and related roles must complete comprehensive antitrust compliance training on an annual basis. Training must cover the Sherman Act, the Competition Act (Canada), and applicable foreign competition laws; the specific types of conduct at issue in the investigation (price-fixing, market allocation, and bid-rigging); the consequences of antitrust violations for both the Company and individuals; and the Company's policies and procedures for identifying and reporting potential violations. We note that TMC's prior antitrust compliance training program, originally adopted in 2014, had not included annual training since approximately 2018—a lapse that was identified during the internal investigation and that the DOJ cited as a contributing factor in the breakdown of compliance controls.

(b) Independent Chief Compliance Officer: TMC must appoint an independent Chief Compliance Officer ("CCO") who reports directly to the Board of Directors (or to a Board-level committee, such as the Audit Committee). The CCO must have sufficient authority, resources, and access to senior leadership to carry out his or her responsibilities effectively. The CCO's responsibilities include overseeing the Compliance Program, managing the compliance hotline, conducting and overseeing internal audits, and reporting to the Board on compliance matters. We recommend that TMC move promptly to fill this position if it has not already done so.

(c) Annual Compliance Certifications: The CEO (Søren Dalmqvist) and General Counsel (Priya Anand) must each provide annual written certifications confirming TMC's compliance with the NPA's terms and the Compliance Program's requirements. Calderwood & Harkness previously provided templates for these certifications, dated May 10, 2024. The first annual compliance certifications will be due on or about May 6, 2025 (one year from NPA execution). We will work with Priya's office to ensure that the certifications are prepared and submitted in a timely manner.

(d) Competitor-Contact Protocols: All contacts between TMC employees and employees or representatives of competitors must be documented and must receive prior written approval from the CCO (or, until the CCO is appointed, from the General Counsel's office). This includes both formal and informal contacts, whether in person, by telephone, by email, or through any other medium. The purpose of this protocol is to create a contemporaneous record of all competitor interactions and to ensure that no TMC employee engages in discussions of competitively sensitive topics—including pricing, costs, margins, customer allocation, bidding strategies, or production volumes—with any competitor.

(e) Trade-Association Interaction Policies: Attendance at conferences, meetings, or events sponsored by the North American Specialty Minerals Council ("NASMC") or any similar trade association or industry group must be pre-approved by the CCO. Side meetings with competitor personnel at such events are prohibited without the express prior written approval of the CCO. Attendees must prepare written reports summarizing the topics discussed and any interactions with competitors at such events.

(f) Confidential Reporting Hotline: TMC must maintain a confidential reporting hotline through which employees may report potential antitrust violations or other compliance concerns without fear of retaliation. Reports to the hotline must be investigated promptly, and the results of all investigations must be documented and reported to the CCO and to the Board.

(g) Periodic Internal Auditing: TMC must conduct periodic internal audits of the effectiveness of the Compliance Program. Audits should assess employee awareness and understanding of antitrust compliance requirements, the adequacy of training programs, the effectiveness of competitor-contact protocols and trade-association policies, and the handling of hotline reports and internal investigations.

We emphasize that the Compliance Program is not merely a paperwork exercise. The DOJ will evaluate TMC's compliance with the NPA in part by assessing whether the Compliance Program has been implemented in substance—not merely in form—and whether TMC's leadership has demonstrated a genuine commitment to a culture of antitrust compliance. We encourage TMC's leadership to approach the Compliance Program as an opportunity to establish a best-in-class compliance framework that will serve the Company well beyond the expiration of the NPA term.

8. Independent Compliance Monitor

The NPA requires TMC to retain an independent compliance monitor, approved by the DOJ, for a period of two (2) years from the date of NPA execution. The monitor term therefore runs from May 6, 2024 through May 6, 2026.

Meridian Compliance Partners LLC has been pre-approved by the DOJ to serve as the independent compliance monitor. The engagement will be led by Claudia Ferraro, Managing Director, with Meridian's offices located at 1100 Connecticut Avenue NW, Suite 730, Washington, DC 20036. Meridian's appointment was the product of a nomination process conducted in consultation with the DOJ, and the Division's approval was communicated in writing on April 15, 2024.

The compliance monitor's scope of work, as defined in the NPA, includes the following:

(a) Reviewing TMC's implementation of the Enhanced Antitrust Compliance Program and assessing whether the program has been implemented in a manner consistent with the requirements of Appendix A to the NPA.

(b) Conducting periodic assessments and audits of TMC's compliance controls, including but not limited to training programs, competitor-contact protocols, trade-association policies, hotline operations, and internal audit procedures.

(c) Reporting to both TMC and the DOJ on the effectiveness of the Compliance Program at intervals specified in the NPA. We expect that the monitor will issue written reports at least semi-annually, with interim reporting as circumstances may warrant.

(d) Making recommendations to TMC and the DOJ regarding improvements to the Compliance Program, which TMC is expected to adopt unless TMC has a reasonable basis for objecting to a specific recommendation and the DOJ concurs in that objection.

TMC must provide the monitor with unrestricted access to TMC personnel, documents, and systems as needed to carry out the monitor's mandate. Any effort to limit or obstruct the monitor's access would constitute a violation of the NPA.

TMC bears the full cost of the monitor engagement. Meridian's fees through the date of NPA execution were approximately USD 1.1 million, which reflected work performed during the development of the Compliance Program proposal and the monitor-nomination process. Ongoing fees for the two-year monitor engagement will be governed by the engagement terms proposed to the DOJ on April 20, 2024, which Calderwood & Harkness reviewed and approved on TMC's behalf. We recommend that Richard Fong's office establish appropriate budget allocations for the monitor engagement.

We further recommend that any material disagreements between TMC and the monitor regarding recommendations or findings be raised with Calderwood & Harkness before TMC responds to the monitor. It is important that any such disagreements be handled carefully to avoid any appearance of non-cooperation, while at the same time ensuring that TMC's legitimate interests are protected.

9. No-Prosecution Protections and Conditions

The core protection afforded to TMC under the NPA is the DOJ's agreement not to bring criminal charges against TMC or any current TMC employee (other than Gavin Holt) based on the conduct described in the NPA and the Agreed Statement of Facts, provided that TMC complies with all terms and conditions of the NPA throughout the three-year NPA term.

This protection is conditional, not absolute. It is contingent upon TMC's full and complete compliance with every term of the NPA through May 6, 2027. If TMC materially breaches any provision of the NPA, the DOJ may, at its sole discretion, determine that the breach is material and proceed to prosecute TMC criminally. In the event of such a prosecution, the DOJ would be entitled to use the Agreed Statement of Facts set forth in Appendix B to the NPA, including all factual admissions made therein, as evidence against TMC. TMC would have waived certain rights in connection with the use of such evidence. The consequences of a material breach would therefore be severe and would effectively eliminate the protections that TMC has worked diligently to obtain over the past twenty-seven months.

We cannot overstate the importance of strict and diligent compliance with each and every term of the NPA. Every TMC officer, director, and employee with responsibilities relating to NPA compliance should understand that any lapse—whether in the monetary payment, cooperation obligations, compliance program implementation, monitor engagement, or annual certifications—could place the Company at risk.

It is also important to note that the NPA does not protect TMC against civil liability. Private parties—including customers who purchased high-purity feldspar, industrial talc, or rare-earth concentrates from TMC during the relevant period—may bring civil antitrust actions, including claims for treble damages under Section 4 of the Clayton Act (15 U.S.C. § 15). The existence of the NPA and its Agreed Statement of Facts could be relevant to such claims, and the Company should be prepared for the possibility that civil litigation may follow in the wake of the investigation's resolution. Calderwood & Harkness is available to assist with the defense of any such claims, as discussed in Section 14 below.

10. D&O Insurance and Ongoing Coverage

We wish to remind you that TMC tendered notice of the investigation to Northland Mutual Insurance Co. on March 4, 2022, under Directors and Officers Liability Insurance Policy No. NMI-DO-2021-5547, which carries an aggregate limit of USD 50 million and a retention of USD 2.5 million.

Northland acknowledged coverage for defense costs of individual directors and officers but reserved rights regarding entity coverage and the policy's regulatory/criminal exclusion. As you will recall, the reservation-of-rights letter, dated March 29, 2022, specifically cited the policy's exclusion for losses arising from criminal proceedings and the separate exclusion for fines, penalties, and monetary sanctions imposed by a governmental or regulatory authority. Northland's position was that coverage for entity-level defense costs and any monetary payment to the government would be assessed at the conclusion of the matter in light of the final resolution.

TMC also notified its excess-layer carriers:

• Layer 2: Greystone Specialty Insurance Ltd. — USD 25 million excess of USD 50 million; and

• Layer 3: Sentinel Re Ltd. — USD 25 million excess of USD 75 million.

Both excess carriers acknowledged receipt of the notice and reserved rights consistent with Northland's position.

We recommend the following steps with respect to insurance coverage:

(a) TMC should update Northland and the excess carriers regarding the NPA resolution at the earliest opportunity. The fact that the investigation has been resolved without criminal charges against TMC or any current TMC employee may materially affect Northland's reserved-rights analysis, particularly with respect to the regulatory/criminal exclusion. An NPA, unlike a guilty plea or conviction, does not constitute a criminal proceeding in the traditional sense, and there may be a basis for coverage of certain defense costs and potentially other insured losses.

(b) Any claims by individual directors and officers for defense costs incurred in connection with the investigation (e.g., costs of separate counsel, if any) should be submitted to Northland for processing under the D&O policy.

(c) Calderwood & Harkness remains available to assist TMC with any coverage disputes that may arise in connection with the NPA resolution or any subsequent civil litigation.

11. Public Disclosure Considerations

TMC first publicly disclosed the existence of the DOJ investigation in its fiscal year 2021 annual report, filed on SEDAR+ (for Canadian securities-law purposes) and with the U.S. Securities and Exchange Commission on Form 40-F on March 28, 2022. Subsequent periodic filings have included updated disclosure regarding the status of the investigation and the litigation reserve established in connection therewith.

The resolution of the investigation through the NPA, and the associated USD 48.5 million monetary payment obligation, will need to be disclosed in TMC's next periodic filing. In addition, depending on the timing of the payment and the filing calendar, the Company may have obligations to disclose the resolution on a more expedited basis.

We recommend the following coordination steps:

(a) Accounting treatment: TMC should consult promptly with Calvert & Associates LLP (Daniel Moreau, TMC engagement partner for audit) regarding the accounting treatment of the NPA payment and the release of any excess litigation reserve. As noted above, the current litigation reserve of USD 50 million exceeds the monetary payment of USD 48.5 million by USD 1.5 million, and the treatment of the excess should be determined in consultation with the external auditors.

(b) Market disclosure: TMC should coordinate with Ironbridge Capital Markets Inc. (Alan Kirkwood) regarding any required TSX or NYSE disclosure obligations in connection with the NPA resolution and the monetary payment. Depending on the applicable listing rules and the Company's assessment of materiality, a press release, material-change report, or Form 6-K filing may be required.

(c) Disclosure language: Calderwood & Harkness is available to review and comment on any draft disclosure language regarding the NPA resolution to ensure accuracy and consistency with the terms of the NPA.

12. Key Dates and Deadlines Summary

For ease of reference, we set forth below a consolidated table of all remaining key dates and deadlines arising from the NPA:

We recommend that these dates be entered into the calendaring systems of the General Counsel's office, the CEO's office, the CFO's office, and the office of the Chief Compliance Officer (once appointed), with appropriate advance reminders. Calderwood & Harkness will also maintain an independent docket of all NPA deadlines and will provide advance reminders to Priya Anand's office in connection with each milestone.

13. Professional Fees Summary

We set forth below a summary of professional fees and disbursements incurred in connection with this matter through the date of NPA execution:

We note that Calderwood & Harkness's total fees of approximately USD 18.7 million exceeded the initial budget estimate of approximately USD 12 million. The budget overage was the result of the significant expansion of the matter's scope following receipt of the target letter and the second subpoena, the extensive document review required in connection with both subpoena responses, the need for multiple proffer sessions, and the protracted NPA negotiations. The revised budget was discussed with and approved by Priya Anand in Q1 2023 when the scope of the engagement expanded materially.

Meridian Compliance Partners LLC's ongoing fees as independent compliance monitor will be incurred under a separate engagement and are not included in the foregoing total. Those fees will be governed by the monitor engagement terms previously proposed to the DOJ and reviewed by Calderwood & Harkness.

Final invoices from Calderwood & Harkness for work performed through the investigation closure will be submitted to TMC in the coming weeks. We note that Calderwood & Harkness's engagement remains active for post-NPA compliance advisory work as may be requested by TMC, and any such work will be billed separately under the existing engagement letter.

14. Calderwood & Harkness's Continuing Availability

While the grand jury investigation has been formally closed, Calderwood & Harkness remains available to assist TMC with all matters arising from the NPA and its continuing obligations. Specifically, we are prepared to provide the following services:

(a) NPA cooperation compliance: Assisting TMC in responding to DOJ requests for cooperation, including preparing witnesses for interviews and testimony, reviewing and producing documents as requested, and coordinating with the DOJ on logistical matters.

(b) Compliance monitor interactions: Advising TMC in connection with interactions with the independent compliance monitor, including reviewing monitor reports, responding to monitor recommendations, and resolving any disagreements between TMC and the monitor.

(c) Civil antitrust litigation defense: Representing or advising TMC in connection with any private civil antitrust litigation that may arise from the underlying conduct, including class-action claims and direct-purchaser actions.

(d) Annual compliance certification review: Reviewing and advising on the preparation of the annual compliance certifications required of the CEO and General Counsel.

(e) Future DOJ inquiries: Responding to any additional inquiries or requests from the DOJ Antitrust Division during the NPA term.

We also wish to note that Aaron Liu, the lead associate on this matter, will be transmitting to Priya Anand under separate cover a detailed Post-NPA Compliance Obligations Summary memorandum. That memorandum will provide a comprehensive catalog of all ongoing NPA obligations, deadlines, and recommended internal procedures for compliance, and is expected to be delivered on or about May 25, 2024.

15. Closing and Acknowledgments

In closing, we wish to express our sincere appreciation for the trust that TMC's leadership and Board of Directors have placed in Calderwood & Harkness throughout this engagement. The resolution of a grand jury investigation of this magnitude, without criminal charges against the Company or any current employee, and with a monetary payment reflecting an approximately 49.2% reduction from the DOJ's baseline calculation, is a testament to the Company's commitment to cooperation and remediation.

We wish to acknowledge, in particular, the exceptional professionalism and cooperation of TMC's legal and management teams throughout this representation. Priya, your leadership of the internal effort was indispensable to the quality and timeliness of TMC's cooperation with the DOJ, and the outcome reflects the strength of the partnership between your office and this firm. Søren, your support for the cooperation strategy at the Board level, including your personal involvement in the NPA execution, was critical to achieving this result.

The absence of criminal charges, the avoidance of any admission of criminal liability, and the substantial cooperation credit reflected in the monetary payment represent a favorable outcome by any measure. We encourage TMC to treat this resolution not merely as the conclusion of a difficult chapter, but as a catalyst for building and sustaining a best-in-class antitrust compliance culture that will serve the Company, its employees, its shareholders, and its customers for years to come.

We look forward to continuing to work with you and your team through the NPA compliance period, and we remain available at any time to discuss any questions or concerns arising from this letter or from the NPA itself.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Elaine Forsythe Partner, Antitrust & Competition Practice Group 555 California Street, 40th Floor San Francisco, CA 94104 Direct Dial: (415) 773-6142

Email: eforsythe@calderwoodharkness.com

cc: (via email)

Howard Bellamy, Billing Partner, Calderwood & Harkness LLP (New York) Aaron Liu, Lead Associate, Calderwood & Harkness LLP (San Francisco) Monica Reyes, Associate, Calderwood & Harkness LLP (San Francisco)

Enclosure Note:

A detailed Post-NPA Compliance Obligations Summary memorandum will follow under separate cover, to be transmitted to Ms. Priya Anand by Aaron Liu on or about May 25, 2024.

This letter and any attachments are protected by the attorney-client privilege and the attorney work-product doctrine. This communication is intended solely for the named addressees and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. If you have received this communication in error, please notify the sender immediately and destroy all copies.

Date	Obligation / Milestone
July 5, 2024	USD 48.5 million monetary payment due to the U.S. Treasury (60 days from NPA execution on May 6, 2024)
On or about May 6, 2025	First annual compliance certification due from CEO (Søren Dalmqvist) and General Counsel (Priya Anand) — one year from NPA execution
May 6, 2026	Independent compliance monitor term expires (two years from NPA execution); Meridian Compliance Partners LLC engagement concludes
On or about May 6, 2026	Second annual compliance certification due from CEO and General Counsel
May 6, 2027	NPA term expires; cooperation obligations cease; Enhanced Antitrust Compliance Program NPA mandate ends (three years from NPA execution)
On or about May 6, 2027	Third and final annual compliance certification due from CEO and General Counsel
Professional	Total Fees and Disbursements (Approx.)
Calderwood & Harkness LLP — legal fees and disbursements	USD 18,700,000
Hargrove Forensic Advisory LLC — forensic accounting and economic analysis	USD 1,850,000
Redstone Digital Forensics Inc. — data collection, processing, hosting, and analytics	USD 2,300,000
Meridian Compliance Partners LLC — compliance program development and monitor nomination (through NPA execution)	USD 1,100,000
Grand Total (all vendors + C&H)	USD 23,950,000

ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Attorneys at Law
555 California Street, 40th Floor San Francisco, California 94104
Telephone: (415) 773-6000 Facsimile: (415) 773-6001 www.calderwoodharkness.com
Elaine Forsythe Partner Antitrust & Competition Practice Group Direct Dial: (415) 773-6142
Email: eforsythe@calderwoodharkness.com
May 22, 2024
VIA HAND DELIVERY AND EMAIL
Mr. Søren Dalmqvist Chief Executive Officer Torchlight Mining Corp. 200 Bay Street, Suite 3400 Toronto, ON M5J 2J2 Canada
Ms. Priya Anand General Counsel Torchlight Mining Corp. 200 Bay Street, Suite 3400 Toronto, ON M5J 2J2 Canada
Copy delivered to TMC U.S. Operations: 8750 West Sahara Avenue, Suite 210 Reno, NV 89117, USA
Re: Closure of DOJ Antitrust Division Grand Jury Investigation — Grand Jury No. GJ-22-0194, U.S. District Court, Northern District of California, San Francisco Division; Non-Prosecution Agreement (DOJ Reference No. ATR-SF-2024-00312)
Calderwood & Harkness Matter No.: 1039-00001
Classification: Attorney-Client Privileged and Confidential
Dear Søren and Priya:
1. Purpose and Confirmation of Investigation Closure
We are writing to confirm the receipt of the letter from the United States Department of Justice, Antitrust Division, dated May 20, 2024, formally closing the grand jury investigation captioned above as to Torchlight Mining Corp. ("TMC" or the "Company"). This correspondence constitutes our formal written confirmation to the Company's senior leadership regarding the resolution of this matter and our recommendations concerning the Company's continuing obligations under the Non-Prosecution Agreement described herein.
As you are aware, the investigation at issue was a DOJ Antitrust Division grand jury investigation into suspected price-fixing, market allocation, and bid-rigging in the North American specialty-minerals sector, specifically involving the markets for high-purity feldspar, industrial talc, and rare-earth concentrates. The investigation was conducted before Grand Jury No. GJ-22-0194, empaneled in the United States District Court for the Northern District of California, San Francisco Division. The investigation was formally opened on February 10, 2022, and over the ensuing twenty-seven months, the Antitrust Division conducted an extensive examination of pricing and allocation practices among several participants in the specialty-minerals industry, including TMC and certain of its competitors.
We are pleased to confirm that this investigation has now been resolved through the Non-Prosecution Agreement (the "NPA") executed on May 6, 2024 (DOJ Reference No. ATR-SF-2024-00312). The NPA was executed by you, Søren, on behalf of TMC, and by Julia Stafford-Hayes, Deputy Assistant Attorney General, Antitrust Division, on behalf of the United States Department of Justice. As of May 20, 2024, the DOJ considers the investigation closed as to TMC, subject to TMC's continued compliance with all terms and conditions of the NPA during the three-year compliance period.
We wish to extend our congratulations on this favorable resolution. The outcome avoids criminal charges against TMC or any current TMC employee, subject to TMC's continued compliance with the NPA's terms. This is a meaningful and significant result, reflecting the Company's sustained commitment to cooperation and remediation throughout the course of the investigation. We note, however, that the NPA contains a separate carve-out for Gavin Holt individually, which is addressed in further detail in Section 6 below.
2. Summary of Matter History
Given the length and complexity of this engagement, we believe it is useful to provide a brief chronological recap of the principal milestones for your records and for the benefit of any TMC officers or directors to whom this letter is circulated.
TMC first became aware of the investigation when it received Grand Jury Subpoena Duces Tecum No. GJ-22-0194-SD-003, served on the Company on February 14, 2022. The subpoena required the production of a wide range of documents relating to TMC's pricing, bidding, and competitive conduct in the North American specialty-minerals markets from January 1, 2016 through the date of issuance. Calderwood & Harkness LLP ("Calderwood & Harkness" or "C&H") was formally engaged by TMC on February 18, 2022, to represent the Company in connection with the investigation and to conduct a privileged internal investigation of the underlying conduct.
On May 20, 2022, TMC received a target letter from the DOJ Antitrust Division, confirming that the Company was a target of the grand jury investigation. Receipt of the target letter underscored the seriousness of the matter and prompted the Company's decision—on the advice of this firm—to pursue a strategy of proactive cooperation with the DOJ, which ultimately proved instrumental in achieving the resolution that has now been obtained.
Calderwood & Harkness conducted an extensive internal investigation over the course of approximately eleven months. The internal investigation encompassed the review of approximately 555,000 documents, comprising approximately 487,000 documents collected and reviewed in connection with the first subpoena response and an additional approximately 68,000 documents collected and reviewed in connection with a second subpoena response, totaling approximately 3.2 million pages of material. Document review was supported by Redstone Digital Forensics Inc. (for data collection, processing, and hosting) and Hargrove Forensic Advisory LLC (for forensic accounting and economic analysis of affected commerce). In addition, Calderwood & Harkness attorneys conducted in-depth interviews of twenty-three (23) current and former TMC employees, including individuals in the Company's commercial, sales, pricing, and executive leadership functions.
The findings of the internal investigation were presented to the TMC Board of Directors on January 20, 2023. Following the Board's authorization, Calderwood & Harkness submitted a detailed cooperation proffer to the DOJ Antitrust Division on February 15, 2023. The proffer outlined the findings of the internal investigation and provided the DOJ with a comprehensive understanding of the relevant conduct, the individuals involved, and the scope of affected commerce.
Subsequent to the proffer submission, two TMC employees—Sandra Chu (Director, Strategic Pricing) and Thomas Eriksen (former Vice President, North American Sales)—participated in voluntary proffer sessions with DOJ attorneys and FBI agents. Ms. Chu's proffer session took place on March 10, 2023, and Mr. Eriksen's proffer session took place on April 22, 2023. Both sessions were conducted pursuant to proffer agreements negotiated by Calderwood & Harkness, and both employees provided substantive and candid testimony regarding the conduct at issue.
On September 15, 2023, TMC submitted to the DOJ a proposal for an Enhanced Antitrust Compliance Program, developed by Calderwood & Harkness in collaboration with Meridian Compliance Partners LLC. The compliance program proposal was a critical element of the Company's cooperation strategy and demonstrated TMC's commitment to meaningful, lasting remediation.
On November 1, 2023, the DOJ communicated its willingness to negotiate a Non-Prosecution Agreement with TMC, a significant milestone reflecting the Division's recognition of the quality and timeliness of the Company's cooperation. NPA negotiations proceeded from January 2024 through April 2024, during which time the parties negotiated the monetary payment amount, the cooperation obligations, the compliance program requirements, the independent monitor provisions, and the Agreed Statement of Facts. Terms were agreed in principle on April 8, 2024.
The NPA was executed on May 6, 2024, and the DOJ formally closed the investigation as to TMC by letter dated May 20, 2024. The total duration of the matter, from engagement to closure, was approximately twenty-seven months.
3. Remaining NPA Obligations — Overview
While we are pleased to report that the investigation has been formally closed, it is critically important that TMC's leadership and Board understand that the NPA imposes continuing obligations on the Company for a defined period, and that compliance with those obligations is essential to preserving the favorable resolution that has been achieved.
The NPA has a term of three (3) years from the date of execution. Accordingly, the NPA term runs from May 6, 2024 through May 6, 2027. Throughout this period, TMC must comply with all terms and conditions of the NPA, including but not limited to the monetary payment obligation, cooperation requirements, the Enhanced Antitrust Compliance Program, the independent compliance monitor arrangement, and the annual certification requirements. Material breach of any NPA obligation would permit the DOJ to prosecute TMC based on the Agreed Statement of Facts set forth in Appendix B to the NPA, without the need for any additional grand jury proceedings. The consequences of a material breach would therefore be severe, and we cannot overstate the importance of vigilant compliance with each and every NPA term.
We strongly recommend that this letter be circulated, in its entirety, to Margaret Caldwell (Chair of the TMC Board of Directors), Richard Fong (Chief Financial Officer), and Janet Moreau-Shaw (Chair of the Audit Committee), so that each of these individuals has full awareness of the NPA's continuing obligations and the consequences of non-compliance. We further recommend that the TMC Board establish a standing agenda item for NPA compliance reporting at each regularly scheduled Board meeting throughout the three-year NPA term.
The sections that follow address each of the principal remaining NPA obligations in turn.
4. Monetary Payment Obligation
The NPA requires TMC to make a monetary payment of USD 48,500,000 (forty-eight million five hundred thousand United States dollars) to the United States Treasury. This payment is due within sixty (60) days of the NPA execution date—that is, by July 5, 2024.
The calculation basis for the monetary payment is as follows. The DOJ's standard methodology for determining the monetary component of an NPA in a horizontal price-fixing case begins with a baseline of twenty percent (20%) of the subject company's share of "affected commerce," i.e., the volume of commerce in the affected product markets during the relevant period. The DOJ determined TMC's share of affected commerce to be approximately USD 478 million. Application of the 20% baseline to this figure yields a starting point of approximately USD 95.6 million. The DOJ then applied a cooperation credit and remediation discount of approximately 49.2%, reflecting the timeliness, completeness, and quality of TMC's cooperation with the investigation and the Company's adoption of meaningful remedial measures, including the Enhanced Antitrust Compliance Program. The resulting monetary payment amount is USD 48.5 million.
We note that TMC's current litigation reserve of USD 50 million, which was increased from USD 30 million in Q3 2023 in anticipation of this outcome, is adequate to cover the required payment. We recommend the following coordination steps in connection with the payment:
(a) Coordination with CFO Richard Fong: The payment should be reflected in TMC's financial statements in accordance with applicable accounting standards. We recommend that TMC consult promptly with its external auditors, Calvert & Associates LLP (engagement partner: Daniel Moreau), regarding the appropriate accounting treatment for the NPA payment, including the timing of expense recognition and the release of any excess litigation reserve (the current reserve of USD 50 million exceeds the payment amount by USD 1.5 million).
(b) Coordination with Ironbridge Capital Markets Inc.: TMC should coordinate with its capital-markets advisor, Ironbridge Capital Markets Inc. (Alan Kirkwood), regarding any market-disclosure obligations arising from the NPA resolution and the monetary payment, including any obligations under TSX or NYSE listing rules to issue a press release or material-change report.
(c) Payment logistics: Calderwood & Harkness will provide TMC with the wire instructions for the United States Treasury as received from the DOJ Antitrust Division. We expect to receive these instructions within the next several business days and will transmit them to Priya Anand and Richard Fong promptly upon receipt. We recommend initiating the payment process well in advance of the July 5, 2024 deadline to avoid any risk of late payment, which could be viewed by the DOJ as a compliance failure.
5. Cooperation Obligations
The NPA imposes continuing cooperation obligations on TMC for the full three-year NPA term, running from May 6, 2024 through May 6, 2027. The scope of these cooperation obligations is broad, and TMC should be prepared for the possibility that the DOJ will call upon the Company to provide assistance on multiple occasions during this period. Specifically, the cooperation obligations require:
(a) Full and continuing cooperation: TMC must continue to cooperate fully and truthfully with the DOJ Antitrust Division in any related investigations or prosecutions arising out of, or connected with, the conduct at issue in the investigation.
(b) Employee availability: TMC must make current and, to the extent within its control, former employees available for interviews, proffer sessions, depositions, and testimony—including grand jury and trial testimony—as reasonably requested by the DOJ.
(c) Document and information production: TMC must provide documents and information as reasonably requested by the DOJ, in a timely manner and in the format specified by the Division.
It is important to understand the practical implications of these cooperation obligations. The DOJ's investigation of the North American specialty-minerals sector is not concluded as to all parties. We are aware that the Division is continuing its investigation of at least two other companies: Ridgecrest Minerals Inc. (separately represented by Davenport, Kline & Archer LLP) and Pinnacle Earth Resources Ltd. (separately represented by Ashford Whitmore LLP). The DOJ may also be investigating other entities or individuals that have not been publicly identified. In addition, as discussed in Section 6 below, the DOJ reserves the right to pursue criminal charges against Gavin Holt individually, and Holt is separately represented by Briarcliff Law Group PLLC (Patrick Dunleavy, San Francisco). TMC's cooperation obligations may extend to all of these proceedings, and current TMC employees may be called upon to provide testimony in any prosecution or proceeding arising from the underlying conduct.
We recommend that TMC designate Priya Anand as the internal point of contact for any DOJ cooperation requests. All requests from the DOJ should be channeled through Calderwood & Harkness. No TMC employee should respond directly to a DOJ inquiry or request for information without first consulting with this firm. We will coordinate all responses to ensure that they are timely, complete, and consistent with TMC's obligations under the NPA.
In addition, we wish to remind all TMC personnel that they should not discuss the investigation, the NPA, or the terms of either with employees, counsel, or representatives of Ridgecrest Minerals Inc., Pinnacle Earth Resources Ltd., Cascade Chemical Supply Co., or any other company or individual that was or may be a subject or target of the DOJ's investigation in this sector. Any such communications, even if seemingly innocuous, could jeopardize TMC's compliance with the NPA and could also raise separate obstruction concerns. If any TMC employee receives an inquiry from any such party, that inquiry should be referred immediately to Priya Anand, who should in turn notify Calderwood & Harkness without delay.
6. Gavin Holt Carve-Out
We wish to draw particular attention to the treatment of Gavin Holt under the NPA. The NPA expressly does not extend its protections to Gavin Holt individually. The DOJ reserves the right to pursue criminal charges against Holt based on the conduct described in the NPA and in the Agreed Statement of Facts set forth in Appendix B.
As you are aware, Holt served as TMC's Senior Vice President of Commercial Operations and was a central figure in the conduct that gave rise to the investigation. Holt resigned from TMC effective September 30, 2021—approximately five months prior to the service of the grand jury subpoena. Following the commencement of the investigation, Holt retained separate counsel: Patrick Dunleavy of Briarcliff Law Group PLLC, San Francisco. Holt appeared before the grand jury on June 14, 2022, at which time he asserted his Fifth Amendment privilege against self-incrimination and declined to provide testimony.
TMC's cooperation obligations under the NPA may include making current employees available to testify against Holt in any future criminal proceedings. The Company should be prepared for this possibility and should ensure that all individuals who may be called upon to testify are aware that they may be contacted by the DOJ for this purpose.
We recommend the following internal protocol regarding Gavin Holt:
(a) Any contact from Holt, his counsel Patrick Dunleavy, or any representative of Briarcliff Law Group PLLC should be referred immediately to Calderwood & Harkness. No TMC employee should communicate with Holt or his representatives regarding any matter related to the investigation, the NPA, or the underlying conduct without Calderwood & Harkness counsel present.
(b) TMC should ensure that its document-retention protocols continue to preserve all documents relevant to the investigation, including any documents relating to Holt's conduct, for the duration of the NPA term and beyond, as they may be needed in connection with any future prosecution of Holt.
(c) If any TMC employee is contacted directly by the DOJ, the FBI, or any other government agency regarding Holt, the employee should politely indicate that all communications should be directed to TMC's outside counsel and should promptly notify Priya Anand and Calderwood & Harkness.
7. Enhanced Antitrust Compliance Program
A cornerstone of the NPA is TMC's obligation to implement and maintain the Enhanced Antitrust Compliance Program described in Appendix A to the NPA (the "Compliance Program"). The Compliance Program was developed by Calderwood & Harkness in collaboration with Meridian Compliance Partners LLC, an independent compliance consulting firm led by Claudia Ferraro. The DOJ's approval of the Compliance Program was a critical factor in the Division's decision to resolve the investigation through an NPA rather than through criminal charges.
TMC must implement and maintain the Compliance Program throughout the three-year NPA term. The key elements of the Compliance Program are as follows:
(a) Mandatory Annual Antitrust Compliance Training: All TMC employees in commercial, sales, pricing, business development, and related roles must complete comprehensive antitrust compliance training on an annual basis. Training must cover the Sherman Act, the Competition Act (Canada), and applicable foreign competition laws; the specific types of conduct at issue in the investigation (price-fixing, market allocation, and bid-rigging); the consequences of antitrust violations for both the Company and individuals; and the Company's policies and procedures for identifying and reporting potential violations. We note that TMC's prior antitrust compliance training program, originally adopted in 2014, had not included annual training since approximately 2018—a lapse that was identified during the internal investigation and that the DOJ cited as a contributing factor in the breakdown of compliance controls.
(b) Independent Chief Compliance Officer: TMC must appoint an independent Chief Compliance Officer ("CCO") who reports directly to the Board of Directors (or to a Board-level committee, such as the Audit Committee). The CCO must have sufficient authority, resources, and access to senior leadership to carry out his or her responsibilities effectively. The CCO's responsibilities include overseeing the Compliance Program, managing the compliance hotline, conducting and overseeing internal audits, and reporting to the Board on compliance matters. We recommend that TMC move promptly to fill this position if it has not already done so.
(c) Annual Compliance Certifications: The CEO (Søren Dalmqvist) and General Counsel (Priya Anand) must each provide annual written certifications confirming TMC's compliance with the NPA's terms and the Compliance Program's requirements. Calderwood & Harkness previously provided templates for these certifications, dated May 10, 2024. The first annual compliance certifications will be due on or about May 6, 2025 (one year from NPA execution). We will work with Priya's office to ensure that the certifications are prepared and submitted in a timely manner.
(d) Competitor-Contact Protocols: All contacts between TMC employees and employees or representatives of competitors must be documented and must receive prior written approval from the CCO (or, until the CCO is appointed, from the General Counsel's office). This includes both formal and informal contacts, whether in person, by telephone, by email, or through any other medium. The purpose of this protocol is to create a contemporaneous record of all competitor interactions and to ensure that no TMC employee engages in discussions of competitively sensitive topics—including pricing, costs, margins, customer allocation, bidding strategies, or production volumes—with any competitor.
(e) Trade-Association Interaction Policies: Attendance at conferences, meetings, or events sponsored by the North American Specialty Minerals Council ("NASMC") or any similar trade association or industry group must be pre-approved by the CCO. Side meetings with competitor personnel at such events are prohibited without the express prior written approval of the CCO. Attendees must prepare written reports summarizing the topics discussed and any interactions with competitors at such events.
(f) Confidential Reporting Hotline: TMC must maintain a confidential reporting hotline through which employees may report potential antitrust violations or other compliance concerns without fear of retaliation. Reports to the hotline must be investigated promptly, and the results of all investigations must be documented and reported to the CCO and to the Board.
(g) Periodic Internal Auditing: TMC must conduct periodic internal audits of the effectiveness of the Compliance Program. Audits should assess employee awareness and understanding of antitrust compliance requirements, the adequacy of training programs, the effectiveness of competitor-contact protocols and trade-association policies, and the handling of hotline reports and internal investigations.
We emphasize that the Compliance Program is not merely a paperwork exercise. The DOJ will evaluate TMC's compliance with the NPA in part by assessing whether the Compliance Program has been implemented in substance—not merely in form—and whether TMC's leadership has demonstrated a genuine commitment to a culture of antitrust compliance. We encourage TMC's leadership to approach the Compliance Program as an opportunity to establish a best-in-class compliance framework that will serve the Company well beyond the expiration of the NPA term.
8. Independent Compliance Monitor
The NPA requires TMC to retain an independent compliance monitor, approved by the DOJ, for a period of two (2) years from the date of NPA execution. The monitor term therefore runs from May 6, 2024 through May 6, 2026.
Meridian Compliance Partners LLC has been pre-approved by the DOJ to serve as the independent compliance monitor. The engagement will be led by Claudia Ferraro, Managing Director, with Meridian's offices located at 1100 Connecticut Avenue NW, Suite 730, Washington, DC 20036. Meridian's appointment was the product of a nomination process conducted in consultation with the DOJ, and the Division's approval was communicated in writing on April 15, 2024.
The compliance monitor's scope of work, as defined in the NPA, includes the following:
(a) Reviewing TMC's implementation of the Enhanced Antitrust Compliance Program and assessing whether the program has been implemented in a manner consistent with the requirements of Appendix A to the NPA.
(b) Conducting periodic assessments and audits of TMC's compliance controls, including but not limited to training programs, competitor-contact protocols, trade-association policies, hotline operations, and internal audit procedures.
(c) Reporting to both TMC and the DOJ on the effectiveness of the Compliance Program at intervals specified in the NPA. We expect that the monitor will issue written reports at least semi-annually, with interim reporting as circumstances may warrant.
(d) Making recommendations to TMC and the DOJ regarding improvements to the Compliance Program, which TMC is expected to adopt unless TMC has a reasonable basis for objecting to a specific recommendation and the DOJ concurs in that objection.
TMC must provide the monitor with unrestricted access to TMC personnel, documents, and systems as needed to carry out the monitor's mandate. Any effort to limit or obstruct the monitor's access would constitute a violation of the NPA.
TMC bears the full cost of the monitor engagement. Meridian's fees through the date of NPA execution were approximately USD 1.1 million, which reflected work performed during the development of the Compliance Program proposal and the monitor-nomination process. Ongoing fees for the two-year monitor engagement will be governed by the engagement terms proposed to the DOJ on April 20, 2024, which Calderwood & Harkness reviewed and approved on TMC's behalf. We recommend that Richard Fong's office establish appropriate budget allocations for the monitor engagement.
We further recommend that any material disagreements between TMC and the monitor regarding recommendations or findings be raised with Calderwood & Harkness before TMC responds to the monitor. It is important that any such disagreements be handled carefully to avoid any appearance of non-cooperation, while at the same time ensuring that TMC's legitimate interests are protected.
9. No-Prosecution Protections and Conditions
The core protection afforded to TMC under the NPA is the DOJ's agreement not to bring criminal charges against TMC or any current TMC employee (other than Gavin Holt) based on the conduct described in the NPA and the Agreed Statement of Facts, provided that TMC complies with all terms and conditions of the NPA throughout the three-year NPA term.
This protection is conditional, not absolute. It is contingent upon TMC's full and complete compliance with every term of the NPA through May 6, 2027. If TMC materially breaches any provision of the NPA, the DOJ may, at its sole discretion, determine that the breach is material and proceed to prosecute TMC criminally. In the event of such a prosecution, the DOJ would be entitled to use the Agreed Statement of Facts set forth in Appendix B to the NPA, including all factual admissions made therein, as evidence against TMC. TMC would have waived certain rights in connection with the use of such evidence. The consequences of a material breach would therefore be severe and would effectively eliminate the protections that TMC has worked diligently to obtain over the past twenty-seven months.
We cannot overstate the importance of strict and diligent compliance with each and every term of the NPA. Every TMC officer, director, and employee with responsibilities relating to NPA compliance should understand that any lapse—whether in the monetary payment, cooperation obligations, compliance program implementation, monitor engagement, or annual certifications—could place the Company at risk.
It is also important to note that the NPA does not protect TMC against civil liability. Private parties—including customers who purchased high-purity feldspar, industrial talc, or rare-earth concentrates from TMC during the relevant period—may bring civil antitrust actions, including claims for treble damages under Section 4 of the Clayton Act (15 U.S.C. § 15). The existence of the NPA and its Agreed Statement of Facts could be relevant to such claims, and the Company should be prepared for the possibility that civil litigation may follow in the wake of the investigation's resolution. Calderwood & Harkness is available to assist with the defense of any such claims, as discussed in Section 14 below.
10. D&O Insurance and Ongoing Coverage
We wish to remind you that TMC tendered notice of the investigation to Northland Mutual Insurance Co. on March 4, 2022, under Directors and Officers Liability Insurance Policy No. NMI-DO-2021-5547, which carries an aggregate limit of USD 50 million and a retention of USD 2.5 million.
Northland acknowledged coverage for defense costs of individual directors and officers but reserved rights regarding entity coverage and the policy's regulatory/criminal exclusion. As you will recall, the reservation-of-rights letter, dated March 29, 2022, specifically cited the policy's exclusion for losses arising from criminal proceedings and the separate exclusion for fines, penalties, and monetary sanctions imposed by a governmental or regulatory authority. Northland's position was that coverage for entity-level defense costs and any monetary payment to the government would be assessed at the conclusion of the matter in light of the final resolution.
TMC also notified its excess-layer carriers:
• Layer 2: Greystone Specialty Insurance Ltd. — USD 25 million excess of USD 50 million; and
• Layer 3: Sentinel Re Ltd. — USD 25 million excess of USD 75 million.
Both excess carriers acknowledged receipt of the notice and reserved rights consistent with Northland's position.
We recommend the following steps with respect to insurance coverage:
(a) TMC should update Northland and the excess carriers regarding the NPA resolution at the earliest opportunity. The fact that the investigation has been resolved without criminal charges against TMC or any current TMC employee may materially affect Northland's reserved-rights analysis, particularly with respect to the regulatory/criminal exclusion. An NPA, unlike a guilty plea or conviction, does not constitute a criminal proceeding in the traditional sense, and there may be a basis for coverage of certain defense costs and potentially other insured losses.
(b) Any claims by individual directors and officers for defense costs incurred in connection with the investigation (e.g., costs of separate counsel, if any) should be submitted to Northland for processing under the D&O policy.
(c) Calderwood & Harkness remains available to assist TMC with any coverage disputes that may arise in connection with the NPA resolution or any subsequent civil litigation.
11. Public Disclosure Considerations
TMC first publicly disclosed the existence of the DOJ investigation in its fiscal year 2021 annual report, filed on SEDAR+ (for Canadian securities-law purposes) and with the U.S. Securities and Exchange Commission on Form 40-F on March 28, 2022. Subsequent periodic filings have included updated disclosure regarding the status of the investigation and the litigation reserve established in connection therewith.
The resolution of the investigation through the NPA, and the associated USD 48.5 million monetary payment obligation, will need to be disclosed in TMC's next periodic filing. In addition, depending on the timing of the payment and the filing calendar, the Company may have obligations to disclose the resolution on a more expedited basis.
We recommend the following coordination steps:
(a) Accounting treatment: TMC should consult promptly with Calvert & Associates LLP (Daniel Moreau, TMC engagement partner for audit) regarding the accounting treatment of the NPA payment and the release of any excess litigation reserve. As noted above, the current litigation reserve of USD 50 million exceeds the monetary payment of USD 48.5 million by USD 1.5 million, and the treatment of the excess should be determined in consultation with the external auditors.
(b) Market disclosure: TMC should coordinate with Ironbridge Capital Markets Inc. (Alan Kirkwood) regarding any required TSX or NYSE disclosure obligations in connection with the NPA resolution and the monetary payment. Depending on the applicable listing rules and the Company's assessment of materiality, a press release, material-change report, or Form 6-K filing may be required.
(c) Disclosure language: Calderwood & Harkness is available to review and comment on any draft disclosure language regarding the NPA resolution to ensure accuracy and consistency with the terms of the NPA.
12. Key Dates and Deadlines Summary
For ease of reference, we set forth below a consolidated table of all remaining key dates and deadlines arising from the NPA:
We recommend that these dates be entered into the calendaring systems of the General Counsel's office, the CEO's office, the CFO's office, and the office of the Chief Compliance Officer (once appointed), with appropriate advance reminders. Calderwood & Harkness will also maintain an independent docket of all NPA deadlines and will provide advance reminders to Priya Anand's office in connection with each milestone.
13. Professional Fees Summary
We set forth below a summary of professional fees and disbursements incurred in connection with this matter through the date of NPA execution:
We note that Calderwood & Harkness's total fees of approximately USD 18.7 million exceeded the initial budget estimate of approximately USD 12 million. The budget overage was the result of the significant expansion of the matter's scope following receipt of the target letter and the second subpoena, the extensive document review required in connection with both subpoena responses, the need for multiple proffer sessions, and the protracted NPA negotiations. The revised budget was discussed with and approved by Priya Anand in Q1 2023 when the scope of the engagement expanded materially.
Meridian Compliance Partners LLC's ongoing fees as independent compliance monitor will be incurred under a separate engagement and are not included in the foregoing total. Those fees will be governed by the monitor engagement terms previously proposed to the DOJ and reviewed by Calderwood & Harkness.
Final invoices from Calderwood & Harkness for work performed through the investigation closure will be submitted to TMC in the coming weeks. We note that Calderwood & Harkness's engagement remains active for post-NPA compliance advisory work as may be requested by TMC, and any such work will be billed separately under the existing engagement letter.
14. Calderwood & Harkness's Continuing Availability
While the grand jury investigation has been formally closed, Calderwood & Harkness remains available to assist TMC with all matters arising from the NPA and its continuing obligations. Specifically, we are prepared to provide the following services:
(a) NPA cooperation compliance: Assisting TMC in responding to DOJ requests for cooperation, including preparing witnesses for interviews and testimony, reviewing and producing documents as requested, and coordinating with the DOJ on logistical matters.
(b) Compliance monitor interactions: Advising TMC in connection with interactions with the independent compliance monitor, including reviewing monitor reports, responding to monitor recommendations, and resolving any disagreements between TMC and the monitor.
(c) Civil antitrust litigation defense: Representing or advising TMC in connection with any private civil antitrust litigation that may arise from the underlying conduct, including class-action claims and direct-purchaser actions.
(d) Annual compliance certification review: Reviewing and advising on the preparation of the annual compliance certifications required of the CEO and General Counsel.
(e) Future DOJ inquiries: Responding to any additional inquiries or requests from the DOJ Antitrust Division during the NPA term.
We also wish to note that Aaron Liu, the lead associate on this matter, will be transmitting to Priya Anand under separate cover a detailed Post-NPA Compliance Obligations Summary memorandum. That memorandum will provide a comprehensive catalog of all ongoing NPA obligations, deadlines, and recommended internal procedures for compliance, and is expected to be delivered on or about May 25, 2024.
15. Closing and Acknowledgments
In closing, we wish to express our sincere appreciation for the trust that TMC's leadership and Board of Directors have placed in Calderwood & Harkness throughout this engagement. The resolution of a grand jury investigation of this magnitude, without criminal charges against the Company or any current employee, and with a monetary payment reflecting an approximately 49.2% reduction from the DOJ's baseline calculation, is a testament to the Company's commitment to cooperation and remediation.
We wish to acknowledge, in particular, the exceptional professionalism and cooperation of TMC's legal and management teams throughout this representation. Priya, your leadership of the internal effort was indispensable to the quality and timeliness of TMC's cooperation with the DOJ, and the outcome reflects the strength of the partnership between your office and this firm. Søren, your support for the cooperation strategy at the Board level, including your personal involvement in the NPA execution, was critical to achieving this result.
The absence of criminal charges, the avoidance of any admission of criminal liability, and the substantial cooperation credit reflected in the monetary payment represent a favorable outcome by any measure. We encourage TMC to treat this resolution not merely as the conclusion of a difficult chapter, but as a catalyst for building and sustaining a best-in-class antitrust compliance culture that will serve the Company, its employees, its shareholders, and its customers for years to come.
We look forward to continuing to work with you and your team through the NPA compliance period, and we remain available at any time to discuss any questions or concerns arising from this letter or from the NPA itself.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Elaine Forsythe Partner, Antitrust & Competition Practice Group 555 California Street, 40th Floor San Francisco, CA 94104 Direct Dial: (415) 773-6142
Email: eforsythe@calderwoodharkness.com
cc: (via email)
Howard Bellamy, Billing Partner, Calderwood & Harkness LLP (New York) Aaron Liu, Lead Associate, Calderwood & Harkness LLP (San Francisco) Monica Reyes, Associate, Calderwood & Harkness LLP (San Francisco)
Enclosure Note:
A detailed Post-NPA Compliance Obligations Summary memorandum will follow under separate cover, to be transmitted to Ms. Priya Anand by Aaron Liu on or about May 25, 2024.
This letter and any attachments are protected by the attorney-client privilege and the attorney work-product doctrine. This communication is intended solely for the named addressees and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP. If you have received this communication in error, please notify the sender immediately and destroy all copies.
Date | Obligation / Milestone
July 5, 2024 | USD 48.5 million monetary payment due to the U.S. Treasury (60 days from NPA execution on May 6, 2024)
On or about May 6, 2025 | First annual compliance certification due from CEO (Søren Dalmqvist) and General Counsel (Priya Anand) — one year from NPA execution
May 6, 2026 | Independent compliance monitor term expires (two years from NPA execution); Meridian Compliance Partners LLC engagement concludes
On or about May 6, 2026 | Second annual compliance certification due from CEO and General Counsel
May 6, 2027 | NPA term expires; cooperation obligations cease; Enhanced Antitrust Compliance Program NPA mandate ends (three years from NPA execution)
On or about May 6, 2027 | Third and final annual compliance certification due from CEO and General Counsel
Professional | Total Fees and Disbursements (Approx.)
Calderwood & Harkness LLP — legal fees and disbursements | USD 18,700,000
Hargrove Forensic Advisory LLC — forensic accounting and economic analysis | USD 1,850,000
Redstone Digital Forensics Inc. — data collection, processing, hosting, and analytics | USD 2,300,000
Meridian Compliance Partners LLC — compliance program development and monitor nomination (through NPA execution) | USD 1,100,000
Grand Total (all vendors + C&H) | USD 23,950,000

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